Test 1 Flashcards
what is accounting
the language of business; a system of maintaining records of a companies operations and communicating that information to decisions makers
what is financial accounting
accounting information for external users; public
what is managerial accounting
accounting information for internal users’ inside people
what are assets
resources of a company
examples of assets
cash, land, supplies, equipment, inventory, accounts receivable
what are liabilities
amount owed to creditors; debts; obligations/promises to others
examples of liabilities
notes payable, accounts payable, (anything payable?)
what is stockholders equity
owners claim to resources
examples of SHE
Common Stock, retained earnings
what is the accounting equation
Assets= liabilities+SHE
what is a revenue
sales of products or services to customers
what are expenses
costs of selling products or services
what is the net income equation
Revenues-expenses= net income
what are dividends
distribution of profit to stockholders
what is an income statement
reports the company’s revenues and expenses over an interval of time
what is the statement of stockholders equity
summarizes the changes in stockholders equity over an interval of time
what is stockholders equity
=common stock+retained earnings, dividends
what is a balance sheet
presents the financial position of the company on a particular date; claim to resources; assets, liabilities, SHE, common stock, retained earnings
what are statements of cash flows
measures activities involving cash receipts and cash payments over an interval of time
what are operating cash flows
cash transactions involving revenues and expenses
what are investing ash flows
cash transactions involving purchase and sale of long term assets
financing cash flows
cash transaction involving leaders and stockholders
accounts affected; issue common stock for 25000 to obtain the funds
common stock
cash
accounts affected; borrows 10,000 for bank and a sign note
notes payable, cash
accounts affected; purchase equipment using 24,000 cash
cash, equipment
accounts affected; pay one year rent in advance 6,000
prepaid rent (asset account), cash
accounts affected; provide training to customers for cash 4,300
cash, service revenue
group 1 of debit/credit rules
increase by debit, decrease by credit; assets, expense, dividends
group 2 of debit/credit rules
decrease by debit, increase by credit; liabilities, stockholders equity; common stock, retained earnings, revenues
revenue recognition principle
revenues are recorded in the period in which the goods or services are provided to customers
expense recognition principle (matching period)
expenses are reported in the same period as the revenues they help to generate
accrual basis revenue recognition
when goods and services are provided to customers
cash basis revenue recognition
when cash is received
accrual basis expense recognition
in the period costs are used to help produce revenues
cash basis expense recognition
when cash is paid
who is/isnt apart of GAAP
accrual basis is, cash basis is not
what are prepaid expenses
pay cash (or have an obligation to pay cash) to purchase an asset in the current period that will be recorded as an expense in a future period
what are deferred revenues
receive cash in the current period that will be recorded as revenue in a future period; originally a liability because there is an obligation the customer
what are accrued expenses
record an expense in the current period that will be paid in cash in a future period
interest formula
borrowed money x %interest x (1/12)
what is depreciation
cash paid for equipment; decrease in usefulness
deposit outstanding
cash receipts of the company that have not been added to the bank’s record of the company’s balance
checks outstanding
checks the company has written that have not been subtracted from the bank’s record of the company’s balance
cash transactions
recored by bank but not by company
retained earnings
represents the cumulative amount of net income earned over the life of the company that has not been distributed to stockholders as dividends
bank reconciliation
marches the balance of cash in the bank account with the balance of cash in the company’s own words
order of financial statements being prepared
income statement, SHE, balance sheet
GAAP
the body of rules and procedures that guide the measurement and communication of financial accounting information in the United States
Financial accounting standards board
where financial accounting and reporting standards in the United States are established
measuring process transactions
using source documents to analyze accounts affected, recording transactions, analyzing transactions for their effects on the accounting equation
order of measuring process transactions (whole thing)
using source documents to analyze accounts affected, analyzing transactions for their effect on the accounting equation, recording transactions in journal, general ledger (posting), trial balance, make adjusting entries, adjusted trial balance, prepare financial statements, closing temporary account
is deferred revenue an asset, liability, or SHE
liability
which of the accounts are decreased on the debit side and increased on the credit side
liabilities, common stock, revenues
which of the accounts are increased on the debit side and decreased on the credit side
assets, expense, dividends
which would normally have a debit balance
cash, delivery expense, dividends; all increase by debit
what does utilities expense do
increases with debits
what are accounts payable, service revenue, and common stock apart of
credit
posting transactions to T-Accounts involve
transferring debit and credit information form the journal to the accounts in the general ledger
what does a trial balance represent
list of all accounts and their balances at a particular date to ensure that debits equal credits
what does matching principles state
all costs that are used to generate revenue is recognized
why is a bank reconciliation necessary
the company has transactions that the bank has not recorded, the bank has transactions that the company has not recorded, reconciliations provide a control over cash
deposit outstanding would be placed…
added to the bank’s cash balance
bank reconciliation and interest
add interest to company
bank reconciliation and service charge
subtract service charge to the company balance
bank reconciliation and NSF checks
subtract checks form the company’s balance
bank reconciliation and deposits
add deposits outstanding to the banks balance
